Speaker 1: Let's get to our next guest. We're talking to Kylie Ghana,
Speaker 1: senior commodity strategistem broker at the Kylieue Trading And of course, Kylie,
Speaker 1: we've had the press conference this morning from President Biden
Speaker 1: talking about he would how he would look to impose
Speaker 1: higher taxes on oil companies that record windfoil windfall profits
Speaker 1: without reinvesting this in production. How realistic is this policy
Speaker 1: From the looks of things, I think this is more talk.
Speaker 1: I don't think that it's realistic that we would actually
Speaker 1: have it. He would actually have a chance to implement
Speaker 1: this policy, but I think he just the talk actually
Speaker 1: does quite a bit of damage to market confidence. And
Speaker 1: the reality is commodities are a boom and bust industry.
Speaker 1: The highs are really high and the lows are really low.
Speaker 1: So if we're gonna a tax success, we're probably gonna
Speaker 1: have to prepare to subsidize during bad times because the
Speaker 1: bad times will come back around. They always do. You know,
Speaker 1: it was a pretty long period about five teen years
Speaker 1: or so that the oil industry struggled a little bit.
Speaker 1: I mean, if you look at even excellent mobiles, um
Speaker 1: stop price it's now it's at ten dollars, but it
Speaker 1: was at ninety three dollars back in in two thousand
Speaker 1: and seven, so that's not a huge gain. It's only
Speaker 1: a gain over over all this many years, fifteen years, um.
Speaker 1: And and the oil price itself was at eighty dollars
Speaker 1: back in those in those mid two thousand's as as well. UM.
Speaker 1: The President when he made his comments today, really referred
Speaker 1: to the big change from last year to this year.
Speaker 1: But is there a little bit of a loss of
Speaker 1: perspective in all of this? In my opinion, there is.
Speaker 1: I really don't like the spirit of of this type
Speaker 1: of policy. I mean, the reality is tax cuts deter
Speaker 1: investment in new production as opposed to doing the opposite,
Speaker 1: which I believe is the goal is to get oil
Speaker 1: producers to produce more. But the reality is, unfortunately nobody
Speaker 1: wants to hear this, but maybe tax breaks two small
Speaker 1: producers might be a way to do that. Um. Maybe
Speaker 1: low uh sorry, low interest rate loans too small producers,
Speaker 1: because it is the small producers that don't have to
Speaker 1: answer to shareholders and they're the ones they can pick
Speaker 1: up the slack, and they have been picking up the slack.
Speaker 1: If you look at the US production at this particular time,
Speaker 1: we're almost up to the early levels. Similar Similarly, OPEC
Speaker 1: is as well, so we're producing almost as much oil
Speaker 1: globally as we did in early everybody's still just trying
Speaker 1: to recalibrate from all the chaos. I mean, the oil
Speaker 1: industry has been through two black Swan events in the
Speaker 1: same amount of years. We had the COVID crash and
Speaker 1: then we had the Russian invasion. If it weren't for
Speaker 1: those two events, my opinion is we probably would be
Speaker 1: uh in a comfort zone between about ninety two and
Speaker 1: sixty five that I got that based on a chart
Speaker 1: channel that we had been in trading before and after
Speaker 1: these two events, um with some of very aberrations. Let's
Speaker 1: take a look at the Baker Hues rig count as well.
Speaker 1: That's slowly grinding higher. It's up about from about five
Speaker 1: and thirty now six hundred ten since we had the
Speaker 1: peak of w T I and March. Are you surprised that,
Speaker 1: with prices high and seemingly enduringly high, that we haven't
Speaker 1: seen US shower production crank up a bit more? You know,
Speaker 1: I think production is coming, and it's but it's coming
Speaker 1: slower than what we're used to. But to be honest,
Speaker 1: I don't think that's such a bad thing in the
Speaker 1: long run. I think price stability is what is going
Speaker 1: to be healthy for both businesses and consumers and and
Speaker 1: everybody involved. It's interesting you mentioned the recount we started
Speaker 1: a couple of years ago. The recount I think was
Speaker 1: somewhere around a hundred and seventy, and you're right now
Speaker 1: we're up around a two hundred, two year high over
Speaker 1: six hundred. So supply is coming. It's just not coming
Speaker 1: as fast as we all wanted to because we were
Speaker 1: feeling it at the pump. But it it is coming,
Speaker 1: and I think, um, ideally, in a perfect world, we'd
Speaker 1: like to see some some bald on thing, like I said, uh,
Speaker 1: somewhere in the sixty five to ninety dollar area crewed.
Speaker 1: Hopefully we'll find the comfort zone and we can I'll
Speaker 1: get back on with our lives. If you had to
Speaker 1: pick a date where we would have the right balance
Speaker 1: between supply and demand, when might that be? Well, the
Speaker 1: interesting thing is we don't know what we don't know.
Speaker 1: You know, if you would have asked us that in January,
Speaker 1: we would have a completely different answer than what we
Speaker 1: might have just a few months later. So all we
Speaker 1: can do is take it day by day. But I
Speaker 1: think we're closer than most people realize. If you look
Speaker 1: at UM the big picture numbers roughly about a hundred
Speaker 1: um hunter million barrels a date in both production and consumption.
Speaker 1: We seem to be balancing out there. That's exactly where
Speaker 1: we were when prices were kind of stabilized in between
Speaker 1: about two thousand eighteen and two thousand nineteen. Prices were
Speaker 1: pretty stable around the sixty dollar range, and we had
Speaker 1: a very similar type of global production and supply figures.
Speaker 1: Now I know there's prospects and speculation that China is
Speaker 1: going to come back online and all of these things
Speaker 1: are going to be uh brought out a balance again.
Speaker 1: But the reality is, again we don't know what we
Speaker 1: don't know, so we just could take it day by
Speaker 1: day and see how things go. Okay, I'll put you
Speaker 1: on this spot July one next year. Where do you
Speaker 1: see w A T I crude, Well, I think we're
Speaker 1: gonna be closer to six than we are a hundred.
Speaker 1: Hopefully that helps. I I believe that. Do you think
Speaker 1: do you think recession is coming? Um? I think that
Speaker 1: we're in recession, and I think that the reality is
Speaker 1: in commodities, high price is always cure high prices, and
Speaker 1: I don't think we've completed the downside cycle yet. That's
Speaker 1: a good point, Okay, Carl, Thank you very much for
Speaker 1: being with us. Carly Garner, senior commodity strategist and broker
Speaker 1: at De Carli Trading